Does social media drive ROI? Many brands are still plagued by this question.

The immediacy and visibility offered by social media marketing has convinced most business owners that it’s worth their time and effort, but calculating its effectiveness is another story. Best practices for measurement are still evolving, and even though brands are committing an increasing percentage of their budgets to social channels, many are still skeptical about its value and return on investment (ROI). What’s a marketer to do?

Content marketing metrics can be confusing and preoccupy your time, so start by selecting a just a few fundamentals to measure.

Content marketing is key in today’s marketplace — it is the intersection of awareness and lead generation. Brands must provide a steady stream of articles, photos, videos, and other resources to demonstrate their relevancy and bring in new customers. While some large companies like Sears, Coca-Cola, and Kraft have quickly caught on to content marketing and are able to accurately measure and leverage their results, it’s not always easy to quantify the value of a piece of content. What makes this process so tricky?

Pinterest Web Analytics gives site owners insights into how people are interacting with pins that originate from their websites.

With more than 48 million users, Pinterest is one of the most popular social networks on the Web. Rather than telling people about your products, Pinterest makes it possible to show what you have to offer. Companies are increasingly using the platform to reach new audiences, increase visits to their websites, and generate leads and sales — and it’s working.

Marketers are clamoring for data to determine the ROI of their social-media efforts, and a new free tool called the Social Page Evaluator, from social media management company Vitrue, is here to help. It’s designed to assist marketers as they try to get a better grasp of the value of a brand’s Facebook Page.

A Facebook Page is commonly referred to as “fan page”, and its purpose is to provide a platform for brands to connect and communicate with their audience. Pages come in many varieties: they can represent actual brands, organizations, non-profits, and other entities — including people, blogs, etc. When you engage and opt-in on a brand’s Facebook Page, you “like” (formerly “Become a Fan”) them.

The Social Page Evaluator is easy to use. Enter the URL of any Facebook Page and it will examine its fan count, post frequency, and various fan interactions with the Page and calculate a valuation. The formula used by the application is related to the formula that Vitrue recently released to estimate the relative value of Facebook Fans to large brands. The tool is adjustable and interactive — for example, the base rate of Earned Media Value (or CPM) is $5, but this can be adjusted higher or lower. There is also a “Fan-tasize” section that enables you to tweak other features like number of posts per day, engagement level, and fan count to see how these impact the valuation.

The interface allows you to compare a Facebook Page with up to three other brands and to view a Page’s value history. In addition to the valuation data, there is also a list of best practices for getting the most out of your Facebook Page that offers a breakdown of contributing factors to your Page’s current value and suggestions about how to improve engagement.

This tool isn’t completely scientific, but it’s one way way to gauge value of a Page to advertisers and to see the factors that impact a Facebook Page valuation. It’s also a good catalyst for thinking about the potential advertising power of a Page.

Companies and brands are finally beginning to fully embrace social media. eMarketer reported in September that 86% of those who responded to a survey of professionals from various industries said they had adopted social technologies. Most said they were using the tools for marketing (57%) and internal collaboration (39%), while almost 30% reported using social technologies for customer service and support:

But despite the broad adoption of social media, measuring its effectiveness lags behind. Only 16% of those polled said they measured ROI for their social media programs:

In addition, more than 40% of respondents didn’t even know whether the social tools they were using were capable of measuring ROI. This means that companies are jumping into the social-media pool without actually accounting for how it will impact their business and what, if any, value it will add.

As of December, about 25% indicated that they had reached the “strategic” phase of their social-media efforts. Those in the strategic phase are significantly more likely than those in earlier phases of the process to measure their success across all objectives. An increase in Web site traffic was the No. 1 goal targeted and measured by all marketers:

Why Measure?

It’s easy to rationalize by saying, “Social media will increase sales” or “Social media will improve customer engagement”, which is probably the case for a lot of brands. But without measuring how these tools work, it’s an uphill battle trying to make them more efficient — how can you improve engagement if you can’t quantify the level and quality of the social interactions you’re already having with your audience?

Companies need to be able to measure the consequences of social media, for better or worse, in order for it to have an impact. But many companies don’t have the faintest idea about where to begin when it comes to measuring the ROI of their social media campaigns and strategies. Measuring social media ROI isn’t impossible, but it can be challenging because many of its components are difficult to track.

As a standard formula, ROI is a pretty basic algebraic equation

ROI = (X – Y) / Y

where X is the gain from your investment and and Y is the cost of your investment. So if you invest $100 and get back $300:

ROI = (300 – 100) / 100 = 2 times your initial investment

For financial purposes, ROI is solely a measure of dollars and cents. But the principles behind it can be applied to any type of investment — including what I like to call Return on Involvement.

2 Great Primers

Social Media ROI, the latest video by Socialnomics, showcases companies that have thrown themselves into social media and gives examples of social media ROI on campaigns. One of the best points made on the Socialnomics blog is that we shouldn’t try to measure social media as if it’s a traditional channel. Erik Qualman, the author of Socialnomics, makes a great analogy: “What is the ROI of your phone?”

And Olivier Blanchard’s presentation, Basics of Social Media ROI, is also a terrific introduction to this topic. It covers covers the definition of ROI, the case for business justification of social media, the actual ROI equation, a step-by-step method for creating a social media ROI proof of concept, and real world no-nonsense advice:

(If you’re unable to see the SlideShare presentation, you can view it here.)

Define Explicit Goals

Before you try to monitor and measure your social media returns, you need to have a clear idea of what you want to accomplish. Having concrete goals and baselines is crucial to calculating your return on investment.

Once you’ve defined your goals, you need to determine the baseline for your levels before starting or changing your social strategy. For example, if your goal is to increase social media mentions of your brand, you need to begin by determining where you stand now in order to quantify the ROI of any actions taken toward that goal going forward. It’s impossible to accurately determine ROI without a baseline.

Some Metrics Tools

ROI is not equivalent to metrics. But traditional Web measures like number of comments, traffic stats, Facebook fans, Twitter followers, etc. are important components of ROI calculation. Pay attention to what the numbers are telling you instead of focusing only on the numbers themselves. Does a spike in Web visitors correlate with higher sales? When people find your Web site via Facebook or Twitter, do they go directly to the e-commerce portion of your site or click on your product pages or elsewhere?

Mashable’s list of 50+ Tools for Measuring Web Traffic reviews packages focusing on real-time tracking and graphical representations of visitor data. Here are a few options for measuring social media:

HootSuite: HootSuite is a great Twitter manager that also offers powerful visualizations of link statistics. The click data enables you to see whether clicks translate into impressions or transactions. Graphs show summary and individual tweet stats.

My.ComMetrics.com: Created by CyTRAP Labs GmbH,My.ComMetrics.com is a Web-based tool that benchmarks social media campaigns and blogs in real time, helping companies and professionals improve their performance (impact, engagement, etc.). CyTRAP Labs GmbH developed the FT ComMetrics Blog Index, the industry standard for ranking corporate blogs of FT Global 500 and Fortune 500 companies.

Omniture: Omniture has quite a few services for companies, including components that track Facebook and Twitter metrics. SiteCatalyst helps increase the relevancy and effectiveness of the latest Web 2.0 tools by optimizing social networking, consumer reviews, blogs, etc.

PostRank Analytics: This suite of tools takes top-level data from Google Analytics and layers social media engagement on top of it. You can monitor page views and visitors (PostRank Analytics will pull this data from your Google Analytics account, if you have one), and you can also track “Engagement,” which is an aggregate score based on how many times your content is commented on, how often it’s mentioned on Twitter, how many people bookmarked it using Digg, etc. You can see the comments and messages that contribute to your stats.

TweetMeme Analytics: If you use TweetMeme’s retweet buttons on your site, this is very useful. It enables report generation for any story on Twitter to help you analyze the spread of content. It also provides data on the tweets, retweets, clicks, domains, users, and locations with the ability to export the information.

What About Sentiment Analysis?

A metric for Twitter mentions doesn’t mean much if you can’t tell whether those mentions are positive or negative. This is where sentiment analysis comes in. It’s helpful to look at sentiment before changing or implementing a social media strategy and trying to calculate your ROI. Here are some tools to check out:

Crimson Hexagon: Crimson Hexagon’s VoxTrot, an enterprise-level tracking tool, is a listening platform that provides companies with actionable insight into consumer opinion of their product, brand, or market. It analyzes social media mentions by identifying statistical patterns in the words used to express opinions on different topics and helps determine customer sentiment toward your brand.

Twendz: Waggener Edstrom’s Twendz is a Twitter-mining Web application that leverages Twitter Search to highlight conversation themes and the sentiment of tweets. Tweets are parsed into three categories: negative, neutral, and positive.

Viral Heat: Viral Heat is is a social measurement platform that aims to be a one stop shop for understanding social media. It analyzes hundreds of viral video destinations, Twitter, and millions of blogs and Web sites enabling you to track campaign performance. Its analytics can show you the most active tweeter, identify the quantity and percent of retweets, calculate the percentage of tweets with URLs, show you which Web sites and videos people are sharing, etc.

Interpreting the Data

Finding trends and tracking them back to their inception is the key to measuring ROI. After defining your baseline, you need to use the metrics derived from your monitoring tools to determine how they correspond to improved customer retention, higher sales, increased Web site traffic, or whatever your primary goals are.

Is sales your key measurement? If your sales have increased, see how many referrers on your e-commerce site come from Twitter or your Web site.

Did you give away coupons in conjunction with a Twitter or Facebook campaign? Calculate which sales are directly correlated by quantifying how many of those coupons were used.

Do you see any trends? Does traffic to your store rise after posting on your Facebook Page? What about Twitter? Does store traffic correlate with more sales when evaluating that same data? Does a higher sentiment analysis on Twitter lead to more visits or sales?

What’s your take?

Do you measure social media ROI? What tools do you use? Is “ROI” the best terminology for measuring social media’s impact, or should it be called something else? What have you found to be good measures of what works and what doesn’t work when deploying social media as part of your strategy? Please share your thoughts!

The folks at Socialnomics have just released another amazing video: Social Media ROI. It offers some terrific examples of how companies and organizations are leveraging social networks to drive business growth and brand awareness. It lays out the case for social media engagement and how it can help you achieve success.

Marketers continue to struggle with how to measure social media. Instead of trying to determine Return on Investment, they need to quantify a new kind of ROI: Return on Involvement.

Here are some great stories from this week about social marketing:

Integrating Social Media Into Marketing (Social Media B2B)
A big reason that we hear a lot about the shift to social media is that organizations are looking to reduce their marketing costs. Yes, leveraging social media can be far less expensive then a large scale print advertising campaign.

Marketing Generation Gap Threatens B2B Survival (Words Sell)
When marketing ideas that elude b2b leadership are patently obvious to young adults with zero training in marketing – you’ve got yourself a real problem. You’ve got a disconnect between what buyers want and what sellers think buyers want. Or, more precisely, you’ve got a disconnect between what buyers want and what sellers think they themselves want when they’re buying.

Why Are Marketers So Bad At Measuring Social Media? (And How Can They Get Better?) (Forrester Blog for Interactive Marketing Professionals)
The fact is, social media marketers are drowning in a sea of metrics. Every social platform and vendor offers its own metrics, and there are literally hundreds of ways to measure the success of social initiatives. With so many numbers to choose from, and so little insight into which metrics are important, it’s not surprising that marketers feel overwhelmed.

Ten Things Social Media Can’t Do (Advertising Age)
Amid the endless pronouncements about social media — often shortened to “social” these days by consultants trying to sound like they know what they are talking about — is the reality that social media is not a solution, or a sure bet.

How Twitter and Social Marketing Will Save the Movies (Jim Louderback)
Social media marketing was behind the biggest movie you’ve never heard of, the amazing Paranormal Activity, which took in $22 million last weekend, making it the highest grossing flick of the week, nearly double its closest competitor.

Marketing in social media not off-putting to users (BizReport)
More research has added weight to the assertion that social network users are receptive to brand marketing messages in their various social environments and are happy to recommend products or services themselves.